tv Bloomberg Bottom Line Bloomberg April 21, 2015 2:00pm-3:01pm EDT
mark: from bloomberg world headquarters in new york, i'm mark crumpton. this is "bottom line." the intersection of business and economics with a main street perspective. to our viewers in united states and those joining us from around the world, welcome. bloomberg west editor at large cory johnson is live in san francisco for the rsa conference on cyber security. peter cook is on capitol hill with arguments on both side of
president obama's fast-track trade authority. in julie hyman and keri geiger are here at the developing story on the arrest in the 2010 equity market flash crash. julie, we begin with you. what do we know so far? julie: it's pretty remarkable. the flash crash is fresh in people's mind, but it's amazing that nearly five years later there has now been arrest of the single individual who, the commodities future trading commission say significantly contributed to that flash crash the plunge that we saw in u.s. markets. his name is navinder sarao he has been charged with unlawfully manipulating, intending to manipulate, and spoofing, especially the s&p e-mini's contract. what do spoofing mean? he sent a flood of substantially sized orders that were significantly different for the
asking price, they were sell orders in this case. and that he canceled on the last moment so that market participants could see that someone was putting in these big sell orders, it looks like that created the market imbalance that then led to the flash crash. the cftc is saying he didn't single-handedly cause it, but that he significantly contributed to it. i have been going through this multiple page, 30 page or so document and complaint, the civil complaint, by the way from the cftc and in the criminal complaint. this individual has been arrested in london. in relation to these charges. * -- mark: we were on the air at the time, we saw the precipitous drop in the markets. five years, why has it taken so long to assign blame? julie: it was a point of confusion. we didn't know if it was a hacking incident, a market failure -- it turns out it was basically a type of illegal
activity as julie said spoofing. the big take away is that it's difficult to pin down with the complexity of how this market works. when something like this goes wrong, regardless of the amount of technology they have, to basically investigate something like this. it shocking that a single individual trading a certain type of security contributed to this. and basically cause the stock market to lose almost 1000 points in one day. you and i were on the air -- mark: you and i were on the air. to say that that was precipitous is an understatement. look at that drop. every thing was going normally and it went off the rails. we kept watching it. >> we kept watching it, another hundred points. at the time they were silly questions about market structure. what does it say about a market
crash that isn't related to a financial event? is seemingly came out of nowhere. the problem is with this arrest, it doesn't solve any of those concerns. the question is how can individual -- a single individual have an effect. it's illegal, though at the time of not sure if technically spoofing was illegal, but it became illegal under dodd-frank. nonetheless, the idea that a single person could have this kind of effect is frightening. >> is going to put a lot of strain on regulators to find out but we are missing that allows an event like this in the single individual who is trading basically to crashes. mark: ladies, thank you. we continue to follow the story. stay with bloomberg television for the latest on this arrest in connection with the 2010 flash crash. let's get to some of the other
top stories we are following on this tuesday. a potential $40 billion pharma deal, teva has offered to buy myallan. a 23% premium to the closing price last thursday. that is when bloomberg reported that teva was considering a bid. mylan publicly rejected them before they made the offer. it recently made an unsolicited $29 billion bid for another company. european policymakers are growing more resistant to helping greek banks. people familiar with the matter say the ecb may reduce the amount of cash banks can borrow for a given amount of collateral. all of us is happening while you're at ways to see if greece will agree to new packages of reforms in return for more bailout money. without new funds, greece may run out of money.
in an interview with bloomberg news, the former ecb president says no one is optimistic about greece. >> we have to be totally realistic. it all depends on the maturing of the position of the government. understanding that if it wants to deliver growth and jobs which is the main goal, of course, the government, it has to produce recovery programs. mark: the former president says he hasn't heard any finance ministers suggesting that a greece should abandon the euro. senate leaders announce plan to move forward on a stalled human trafficking bill, clearing the way for a vote on loretta lynch. lynch was caught in the political crossfire infuriating democrats because republican leaders decided to hold off on her confirmation vote until the trafficking bill was resolved.
breaking news to bloomberg, saudi arabia announcing an end to its airstrike campaign in yemen. there has been turmoil in yemen part of the capital there was taken over by rebels. some links to islamic state. we will continue to follow that story and bring you more developments as soon as we get them. that is a look at the top stories we're following on this tuesday. we now turn our focus to president obama's land to shield of to 5 million immigrants from deportation. last friday, the administration asked a federal appeals court to lift the texas judge's order to block the executive action. the executive director for the center for immigration studies joins me now from washington. welcome to "bottom line." let's try to put politics aside, without pointing fingers, why his immigration reform been so tough to tackle? >> broadly speaking, the political obstacle is that no
one really believes the claims that if we amnesty today's illegal aliens, we will enforce the law tomorrow to make sure we are not in the same situation tomorrow. will this actually be the last chapter? we go for the type, properly enforced immigration system or not? we tried this in 1996, it turned out to be a trick. we have twice as many illegals now as we did with the previous amnesty 25 years ago was passed. that's the issue. will enforcement happen, and the stumbling block is that people are demanding the enforcement systems be fully in place, up and running before we get to amnesty. mark: you mentioned 1980 six
under president reagan. the president actually signed a law that was passed by congress and then president george h.w. bush did a similar action. talk to me about states who are challenging the immigration order. they say they are being harmed economically. is there any substantive evidence to back up that claim? mark krikorian: there is. the point of the lawsuit, 26 of the states are suing the federal government to stop this announced amnesty, which is in limbo now. their claim is this is the federal government imposing costs on the states. the issue, the immediate issue is -- should the amnesty program, that the president has announced, stay in the deep freeze until the full lawsuit is resolved. if the president is allowed to go forward with it the cost c will impose on the states are going to happen, and they are
not going to get that money back even if they win the lawsuit. their claim is, let's put it all on hold until the underlying lawsuit is resolved. and then go forward or not go forward. mark: what president would be said -- what precedent would be set if the court decides on this? mark krikorian: what they are deciding is can the president on his own, without congressional at a solution, go forward and do something of this magnitude, this nature. understand, unlike the little intro the beginning of the segment, this is not about shielding illegal immigrants from deportation. the president five years ago said he wasn't going to be deporting people. this is an affirmative grant of work permits, so security numbers, driver's licenses, the earned income tax credit,
eligibility for affirmative-action preferences. the point is this is giving the illegal immigrants something. the question is does the president get to do it on his own? mark: you mention ronald reagan he was having a debate with his democratic challenger in 1984. president reagan said these words -- i believe in the idea of amnesty for those who have put down roots and who have lived here even though sometime back they may have entered the country illegally. ". by most accounts, the population of illegal immigrants is growing this country. what is the solution? mark krikorian: it's growing more slowly, but growing now because the economy is rebounding. the solution, it seems to me, is first we put in place the systems to make sure this isn't going to happen again. the man's people have been making for 30 years and still have not met. turn off the magnet of jobs, make sure the visitors leave when they are supposed to leave, because half of illegals came in
legally and didn't leave. the point is you have that stuff up and running. it survives lawsuits, it's proven. then you have what i am for amnesty forwarded illegal aliens who aren't violent criminals, in exchange for cuts in legal immigration, so we can get to a more stable equilibrium on immigration reform. mark: mark krikorian joining us from washington. we appreciate your time. still ahead, peter cook talks with a senator about president obama's fast-track trade authority. that and more when "bottom line," continues in just a moment. ♪
jurors they must keep an open mind on what punishment the defendant should receive. the jury will decide whether he should be sentenced to life in prison or be executed. 300 were killed more than 260 were injured in the bombings. the world's largest events contractor has raised its annual profit forecast. lockheed martin reported improving margins for the aircraft unit led by the f 35 fighter jet that's helping offset the impact of defense spending cuts. meantime, the company that makes jet engine for military planes be turning estimates in the first quarter. in a technologies was helped by cost-cutting measures. that's a look at the top stories we are following at this hour. coming up on bloomberg television at 2:20, peter cook speaks with delaware senator tom carper, to discuss trade talks. at 2:30, cory johnson's live from the rsa conference in san francisco. he has a chat with ibm's
>> first, bloomberg. mark: welcome back, this is "bottom line." top lobbyist for business and organized labor addled over trade today on capitol hill. the u.s. chamber of congress -- commerce was trying to sway congress as they consider a bipartisan bill to give the president so-called fast-track trade authority. peter cook is on the hill with more on the hearing and the
outlook for fast-track legislation. peter, good afternoon. peter: mark, good afternoon. tom donahue has partnered with him on issues of immigration of her structure. on the issue of trade, is a bridge too far for big business and organized labor at this point. both of them making their case, mr. donohue for trade promotion authority for the president, and richard trump on the other side of the issue saying that congress should stand in the way of this and get a better deal in terms of trade. here are some of their testimony this morning from the senate finance committee. >> why does trade matter to the country? it comes down to american jobs. one in four manufacturing jobs depends on exports. one in three acres of american farms is planted for consumers overseas. all told, nearly 40 million american jobs depend on trade. >> i can understand my friend tom advocating for fast-track.
his members have benefited by him, benefited greatly. but the average working folks in this country haven't. and we needed different deal. -- we need a different deal. peter: some of the arguments for and against trade promotion by the president. i'm joined by tom carper democrat -- of delaware. they will vote on whether or not to give the president fast-track authority as soon as tomorrow. you are a yes on this? senator carper: ever president has had this but in. peter: i heard skeptical democrats. not everyone is sold. senator carper:
we want to sell chickens all over the world. we want to be down the trade barriers we can tell or poultry. that's just one example. we don't buy cars in japan. that's one of the deals we want. peter: richard trump is convinced is not of the best interest of american workers. the one thing they point to is they are not convinced it's going to raise americans wages, so much focus on inequality what do you make of that argument? senator carper: manufacturing is well under this. agriculture does well. 90% of the world's markets are outside of our borders. we give china leg up. peter: what is your sense about how this will play out in the committee and on the floor? you are strongly supportive, the president will be pleased. there are still some democrats who are on the outs. senator carper:
trade function gives congress a chance to say this is what's important to us. pharmaceuticals, chicken. i think that's going to pass by a huge margin. i think the actual trade agreement itself will probably pass by a larger margin. peter: this is the transpacific we could have europe as well. senator carper: transpacific first. peter: democrats and be on board if there was language in here which prevented other u.s. trading partners from engaging in pressman of elation. they mentioned to china. senator carper: we don't like what they do with their currency. they come around a little, not as much. the concern is if we are not careful, the chinese will do that to us. the same thing the federal reserve did their work on quantitative easing. the fear of the administration
is the chinese will throw them back in our faces. what's good for the goose is good for the gander. you can't do that. peter: you have republicans exposing support for some current ceiling which to be attached to fast-track trade authority. one of the worries that can get out and you have a piece of legislation the president can't support? peter: it may be wrong, but a deal is less for china than japan. we adopted a free-trade agreement about three years ago. we are selling 5000 vehicles, they are selling 500,000. we didn't do anything with price manipulation. we have taken steps to be down the barriers. peter: there is no big divide over the issue of trade. why do you think it has reached this point where someone like you from delaware where their potential upside through state to be supportive of this, but we see democrats on the same panel so opposed? senator carper: if posts -- if folks looking
good -- at the nasca, people are afraid we're going to get that. the one opportunity we have to renegotiate nasca is in this agreement. we have an opportunity to fix those. peter: you just left the meeting of your fellow summer -- senate democrats. his loretta lynch going to get a vote? senator carper: she will get a vote, she's canada. peter: the finance committee will vote in this trade legislation tomorrow. mark beginning the process of clearing the way for the president to get trade promotion authority to negotiate for that transpacific partnership. mark: peter cook on capitol hill with senator carper of delaware. join us tomorrow on "in the loop," betty liu with peter cook. he will interview paul ryan
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i feel like i've been here before. switch now and get the fastest wifi everywhere. comcast business. built for business. mark: welcome back to the second half-hour of "bottom line" on bloomberg television. thank you so much for staying with us. let's get to some of the top stories were following at this hour. let's begin with a check of the price of crude oil at this hour, down about 1.4%. oil halting its advanced before government data forecast to show u.s. crude inventories expanding further from a record. that information tomorrow from the energy information administration. they tuned to bloomberg television. we'll have more on that story.
officials say the mission succeeded in eliminating threats to the kingdom and paved the way for the resumption of these talks. saudi arabia led a group of mostly sunni muslim nations in the airstrikes in yemen, seeking to rollback gains by the shiite rebels. they accuse iran of being behind the insurgents, and allegation that ran -- iran rejects. the 2015 rsa conference is under way at the muskogee's enter in san francisco. this year's theme is change: challenge today's security thinking. "bloomberg west" editor at large cory johnson is covering the event, and he is joined by the vice president of ibm security. cory: that's right. caleb barlow joins me from ibm security. what a fascinating company i cover all the time and love the talk about ibm. ibm doesn't really talk about --
does not really like when i talk about ibm, but what you guys do with security is really interesting and points to a lot of change in the industry. talk about -- to whom do you sell? caleb: our primary focus is the chief security information officer. what's fascinating is this is the newest member of the sea suite. it has not been since the mid-1990's with the formation of the chief information officer that we've had this new role in the sea suite -- they c suite. it's all about risk. >> by the latest update from whatever and hope that that would do the job. >> that's exactly right. now what we have to think about -- security is a risk we have to think about just like we would think about is this risk. how do we mitigate that business risk of security with the investment it will take to protect ourselves? cory: are there particular kinds of tools leading the charge right now that are different from the last few years?
caleb: absolutely. this is about having the breadth and depth kind of strategy with something we call security intelligence. you want to be up to look at everything that is going on, networks on your endpoint and be able to correlate all that information together. just to give you an idea, we process 15 billion to 20 billion security events in our operations center today in order to protect ourselves and our clients. cory: that's impossible to imagine. what you just hinted at is one of the biggest trends, which is that until not long ago, the kinds of attacks have been denial of service. the battering ram to the front door, and the response was bar the door. now, the capabilities are kind of there to use big data, calculate the information, test did that, figure out what it is, and observe and understand it in ways that were not possible before -- test the threat. caleb: absolutely. we're in an unprecedented time
where organized bands of thieves are collaborating like never before to deal intellectual property, money, and in some cases, in p free speech. the attackers are organizing on the dark side of the web. they collaborate with tools processes, and ideas and we have to get organized as well just like the attackers are. cory: it also seems one of there to assist patients. it used to be their tool's run in, grab stuff, run out, and notes it's get in, stay there lurk, observe how the system works where the best goodies might be and when defenses are down the most. >> that's right. at the end of the day, we think about weak signals and strong signals. strong signal, someone enough top your website -- pity easy to figure out. a weak signal could be an advanced persistent threat, an attacker working their way around, and it's only through correlating information, through potentially billions of different sensors, endpoints, information, that we can apply
the intelligence layer to find that attacker. cory: they can often make the case that they got the latest, greatest, the one cutting-edge tool -- what is the ibm sales pitch to say that you've also got the greatest, but you've got something else? caleb: with the fastest-growing security at a price company on the planet. we have 6000 security professionals, but here's the real differentiator. we operate in 130 different countries in the world. what do i mean by that? we have operation centers spread out around the globe and cyber security is a global problem. when there's a problem, an incident, our people's big the language. they understand local trends and techniques know the attackers, and if necessary, we can put feet on the ground. cory: maybe the sense that you are correlating operations and therefore understand the threat better?
in a more networked world, is it as necessary to physically be in all those places or have operations in all those places? a company has the ability to see what's going on across all the networks already. caleb: if you think about an attack, it might appear to come from one origin, the bouncing from three to four locations and come from somewhere else. we have to bring this information together, share information on the net, and that's a big part of what we've announced over the last week is an information network to provide the social tools to allow the defenders to collaborate in an environment just like the attackers are. carory: interesting stuff. thank you very much. mark: thank you both. next, we check in with our report in mexico city for the tuesday edition of "the latin america report." "bottom line" continues in a moment. ♪
"latin america report." jose, good afternoon. jose: but study to go where new york governor andrew cuomo is on date two of a mission -- let's start in cuba. cuomo says he hopes his visit will illustrate economic opportunities between the u.s. and cuba and pressure congress to relieve the embargo of the communist nation. president obama announced the u.s. would restore diplomatic relations with cuba in december, and since then the president has met with raul castro and eased travel restrictions to cuba. cuomo is the first u.s. governor to visit the island since changes were announced. now to exit go with a finance says the country will catch its 2016 oil experts to protect against lower oil prices.
the nation has little room to increase its debts to avoid spending cuts. this is mexico does not yet have any price protection for next year but the country hedged this year's price. the price of mexican crude oil is at a six-year low. finally to chile with the central bank president said he will likely raise interest rates . these are the top stories making headlines here in latin america. now back to you in new york. mark: after the break, chipotle reports earnings after the bell. julie hyman travel to iowa for
mark: updating our top story -- u.s. authorities say a british futures trader contributed to the may 20 10 flash crash by engaging in illegal bait and switch practices. the trader, identified by authorities as 37 year old navinder sarao, was arrested in the u.k. today. the justice department is seeking his extradition today. he ran his own trading shop and faces charges of wire and commodities fraud. the justices department and commodity futures trading commission which filed a separate lawsuit, said he engaged in trading strategies known as layering and spoofing that contributed to the flash
crash that happened on may 6 2010 where the dow industrials plunged 1000 points in just minutes before later recovering some of the losses. the big takeover offer in the pharmaceutical businesses -- teva has offered to buy its rival at a price of more than $1 billion in cash and talk representing a 23% premium to mylan's closing price last thursday. that's when bloomberg reported teva was considering a bid. on friday, mylan took the unusual step of publicly rejecting the offer before it even made -- before it was even made. that's a look at the top stories we are following on this tuesday. coming up at two: 55, scarlet fu chats with michael murphy of rose cliff capital as we go on the markets. later, bill gross tells us why he sees bonds is the short of a
lifetime. in january, chipotle halted sales of pork at hundreds of its restaurants, saying one of its suppliers was not adhering to its strict standards. just what makes chipotle's pork so special? julie went to iowa to find out. >> imagine a pig farm. you probably think of a scene like this. in iowa, you will see pigs in the pasture, beating at a trough, maybe some chickens alongside scratching in the dirt, and, of course, a big red on. >> the summertime, you got knee-deep alfalfa, a sow laying there, nursing her picks contentedly. julie: this is a network of farms spread across iowa and pennsylvania. in reality, the vast majority of pig farms in the u.s. look more like this.
a brenneman pork, sows live inside, alternating between pens for gestation and narrowing or giving birth. both have metal guards. first to keep pigs from fighting with each other and the second to keep them from inadvertently lying down on their babies. once piglets are weaned, they are fattened up in covered pens. in contrast, farms like aldermen must conform to a 14-page list of regulations. among them, pigs must be raised on pasture or embedded pens. gestation and farrowing crates are prohibited and nyman will only buy pigs that have never been given antibiotics. >> it is truly done the old-fashioned way for the old-fashioned flavor. that is not everyone because it is more expensive. the animals grow slower. julie: that limits production to 1200 picks a year versus brenneman, which raises 600,000 to sell to tyson foods. individual sows are less
productive, too. all the man has lasses many piglets per letter. >> if we did the nyman ranch-style, we would produce a good 30% or 40% less every day of the week. we will not even feed our own country let alone export. julie: the conventional industry to works were natural methods like nyman, but demand from clients like its chipotle and shake shack is growing quickly. >> as fast as we recruit additional farms, that's how fast we sell it. the demand has outstripped supply for the last three years. julie: nyman expands 18% to 20% annually, a pace duane calls manageable. that may be as fast as it can grow, given its rules, much to the chagrin of hungry customers. mark: our senior markets correspondent julie hyman joins me now in studio. what are the cost involved in
raising pigs the nyman way? julie: the biggest cost -- and this goes for conventional farming as well -- is probably need. you're looking at reading them -- feeding them corn. they are eating alfalfa and other vegetation that is there that they have planted in the field. you are also looking at the capital cost -- building the barn, the facilities, providing the corn stalks that nyman requires the pig to sleep on, and they also have certain specifications for the depth of the betting that the pigs at the room allowed for each paid. really, when you look at the differences in cost and production, it comes down to what nyman's ceo was talking about -- the pigs, when they grow this way grow more slowly so you are just not getting as many pigs in the same amount of time. when you look at an operation like brenneman, which is
obviously a much larger individual -- operation and whose individual pigs are more productive, the economics, from their perspective, that they have to just produce more pigs. mark: how much of the farmers paid? julie: if you look at a conventional operation the commodity market is about $75 a hog at this point. it reached ap governor but about $100 a hog over the winter. niman pays a premium, but it will not disclose exactly what that premium is. mark: what is the latest on the status of two polar's pork supply? julie: chipotle has said they do not know when they will be fully supplied once again. niman is their biggest individual supplier, but pork only accounts for about percent of their sales. chipotle has been trying to find other suppliers, and it's a difficult process when you do have these various specifications you want your suppliers to it here too. mark: you were talking about
gestation. those crates starting to fall out of favor. julie: you're looking at various producers doing this, on the client side or production side. midfield and cargo are phasing them out as our kroger, the supermarket chain, and dunkin' brands, and they are doing this over years, so it's not as though overnight they are going to be phasing them out. but what it means for the farmers as a practical matter is that they will need more space for the takes -- the pigs. again, it all comes than to economics, how much space you need. that's the change that brings about. mark: an update on chipotle and pork. thanks so much. appreciate it. stay with us. scarlet fu will have a check of market movers on the other side of the great. "bottom line" on bloomberg television continues in just a moment.
seem to have settled on a direction or now though it is to the downside. the group limiting the index -- indexes' decline as health care. it's also the best performing industry group to date, but my next guest says being long on health care is a crowded trade, and the time to switch out is fast approaching. takeovers and speculation about more deals to come as a big driver of this outperformance in health-care shares. does that signally talk to you? >> a lot of people talk about 8% year to date for the xlv but the index is up over 31%, and that's a huge move or names like pfizer, trading up at a 24 multiple. that's a very expensive multiple , a multiple that a company like that does not usually get. johnson & johnson, which is 10% of the sxlv etf is trading at
multiples it does not usually see, but with interesting is the m&a can continue to push a little bit if it continues. i don't think you jump in at these levels because if you missed this past move, the 31% over the last 12 months i would wait for some sort of pull back because i think you will see a rotation in the near term. but you do not necessarily need to exit right now? michael: right. you're seeing breakouts and a lot of these companies. company like iliad, which is the largest company in the xlv, but it's trading down around 10 times earnings, and they have a phenomenal drug it's really changing the entire landscape of hepatitis the treatment -- hepatitis c treatment. technology is causing a lot of breakup drugs, which is causing more m&a. you do not want to stay completely away.
do not jump away now if you are in there. scarlet: potential other sectors like financial and energy are cyclical groups -- is that more a reflection of the underlying economy or steering clear of what has become a pricey sector? michael: i think it's a little bit of both. as the economy recovers, you'll see many going into financials, energy, and industrials, which are down here today, but what you've seen in this market recently is we have marched to new highs on a consistent asus. you are seeing money rotating within the market. you really have not seen a massive pull out of the market. you've seen the percent, 5%, 7% dips in the market, but there's always money rotating within the sector, so i think would money comes out of the health care sector, it will move to some underperforming sectors like financials, industrials, energy. scarelelet: is health care considered a defensive sectarian michael: i guess that depends on who you ask.
if you ask me, i would say no because you have companies like pfizer and merck that used to be boring companies that you would own for dividend, but now they are trading like biotechs because of new drugs, be it through acquisition or their own research and development. i would not call it defense of at all. scarlet: not defense of at all, especially with changes taking place in the industry. michael murphy, thank you for joining us. "street smart" with alix steel is up next on bloomberg television. ♪
alix: welcome to the most important hour of the session. 60 minutes left to the closing bell. this is "street smart," stocks are looking for a direction as investors weigh dealmaking and a slew of earnings reports, and where counting down to results from yahoo!, yum, and chipotle. plus, bill gross himself joins me to talk about what he considers the short of a lifetime and mario draghi's line in the sand. "street smart" starts right now. here are the top stories we're watching ahead of